LONDON, Nov 23 (Reuters) - The euro slumped half a percent on Friday on signs that economic growth could be slowing across the euro zone with worries about Brexit and Italy's budget negotiations also weighing on the single currency.

A steep drop in oil prices on Friday fueled a risk-off wave across the board, setting the dollar on track for its biggest weekly rise in a month.

Business growth in the euro zone slowed much faster than expected this month, a Purchasing Managers Index survey showed.

The disappointing readings, hastened by a U.S.-led trade war, will be of concern to the European Central Bank which is expected to end its 2.6 billion euro asset purchase programme next month before raising interest rates next year.

After German private-sector growth slowed to its lowest level in nearly four years, the euro dropped into negative territory, hitting a five-day low of $1.3430. The euro also dropped 0.2 percent against the Swiss franc to 1.1326 francs.

"Doubts are creeping in about the euro zone economy. If the data doesn't pick up early next year this could turn into a long-term pattern [for the euro]," said Thu Lan Nguyen, a Frankfurt-based strategist at Commerzbank, also pointing to a dispute over Italy’s spending plans.

"If the [euro zone] economy cools significantly... the European Central Bank might be forced to stick to an expansionary monetary policy," she said.

Weakness in the euro supported the dollar, which rose 0.2 percent against a basket of currencies to trade at 96.706 .

The dollar has lost ground for two consecutive trading sessions and is drifting lower from a 16-month high of 97.69 hit earlier this month.

Dollar sceptics are concerned about the pace of future interest rate increases by the U.S. Federal Reserve.

Both the euro and sterling rose on Thursday after Britain and the European Commission agreed on a draft text outlining how their trading relationship will work once Britain has left the European Union.

But EU leaders still have to ratify the agreement at a summit on Sunday and Prime Minister Theresa May would then have to get a Brexit deal through a deeply divided British parliament.

At 1135 GMT the pound traded down 0.4 percent at $1.2817, after gaining 0.8 percent on Thursday.

The Norwegian crown weakened 0.7 percent against the dollar as an overnight drop in oil prices weighed.

The yen was at 112.820 per dollar. The Japanese currency has traded in an extremely narrow range with a soft bias in recent trading sessions.

The Australian dollar, often considered a gauge for global risk appetite, weakened 0.2 percent to trade at $0.7237.

Analysts expect the Aussie to remain subdued ahead of a meeting between U.S. and Chinese leaders at a G20 meeting in Argentina at the end of the month, with markets watching for any sign of whether they may agree to de-escalate their trade war.